Boeing (NYSE:BA) has returned a ton of cash to shareholders in each of the past two years. In 2014, it paid out about $2 billion in dividends and spent $6 billion on share buybacks. In 2015, it has paid $2.5 billion in dividends and repurchased $6.75 billion of its stock.
Not surprisingly, Boeing shareholders can look forward to another year of big dividends and share buybacks in 2016. The aerospace giant unveiled its dividend and buyback plans for 2016 on Monday afternoon, and they didn't disappoint.
Boeing increases its dividend
Boeing is increasing its dividend by 20% for 2016. The quarterly payout will rise to $1.09/share, from $0.91/share in 2015. The increase was a little higher than what most analysts had expected. It will boost the dividend yield from 2.55% to 3.05%, based on Boeing's Monday closing price of $143.
This puts Boeing in the upper half of the Dow components in terms of dividend yield, roughly even with General Electric (NYSE:GE) and McDonald's (NYSE:MCD). Boeing has a lot going for it relative to both of these companies, most notably a stronger earnings trajectory.
Boeing's core earnings per share surged 22% in 2014 to $8.60, up from $7.07 a year earlier. Analysts expect core EPS to fall to $8.25 this year -- largely due to the impact of a special charge related to Boeing's military tanker development -- but then bounce back to $9.44 in 2016.
By contrast, analysts expect adjusted EPS to slide about 20% year over year at General Electric in 2015, and it won't make up all of that lost ground in 2016. While much of GE's business is performing well, it is being pressured by weak demand in the oil and gas sector, along with the impact of its moves to downsize its financial operations.
Meanwhile, McDonald's is in the early stages of a turnaround effort after earnings stagnated and then plunged in the past few years. It made some progress in the third quarter, but its 0.9% comparable sales growth in the U.S. was nothing to brag about. Analysts still expect its 2016 EPS to be lower than the $5.55 it earned in 2013.
Despite Boeing's stronger earnings performance, it is much cheaper than both General Electric and McDonald's. Boeing stock currently trades for a very reasonable valuation of 15 times forward earnings, whereas GE is selling for 20 times forward earnings and McDonald's shares now trade for nearly 22 times earnings.
Healthy buybacks, too
Given that Boeing stock looks relatively cheap, it's good to see that the company also plans to continue buying back stock at a healthy pace. The company replaced the $12 billion share repurchase program it authorized a year ago with a new $14 billion program.
Since Boeing never actually uses its full share buyback authorization before replacing it, the exact figures don't matter that much. However, the fact that it increased the amount could mean that it intends to buy back at least as much stock in 2016 as the $6.75 billion it repurchased in 2015.
That would be enough to retire 7% of the company's shares at the current $143 stock price. Given Boeing's considerable long-term earnings momentum, that's good news. The more shares Boeing can retire at today's cheap stock price, the more the stock is likely to rise in the future if net income grows as expected.
In short, as its cash flow rises, Boeing continues to focus on dividend growth and steady share buybacks. Those are both things for shareholders to cheer about.